Aussie opened the weak sharply lower and broke 0.9 level against dollar on worries of economic outlook of China. A batch of weak economic data released over the weekend highlighted the risk of steeper slowdown in the economy. Industrial production rose 6.9% yoy in August, comparing to prior month's 9.0% yoy in expectation of 8.8% yoy. That's the slowest pace since December 2008 outside out lunar new year periods. Retail sales rose 11.9% yoy in August versus expectation of 12.1% yoy. Fixed asset investment rose 16.5% yoy versus expectation of 16.9% yoy. The concerns also dragged down Asian equities with MSCI Asia Pacific outside Japan index slipped 0.8% to the lowest level since early August.
Elsewhere, dollar stays in tight range against European majors ahead of this week's FOMC meeting. We expected the Fed would continue to scale back its asset purchases by a further USD 10B to USD 15B whilst acknowledging recent improvements in the economic dataflow. That would set up the end of asset purchases in October meeting. Also, fed policymakers would possibly shift to more hawkish stance, leading to earlier than expected rate hike schedule. In particular, markets will focus on whether Fed would drop "considerable time" from sentence of "maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends". In that case, it would be a strong signal that Fed is really ready for interest rates normalization soon.
Another key event would be the Scottish referendum on September 18. The latest polling result released by YouGov suggested that 52% of respondents saying they would vote "no" for independence and 48% saying they'll vote "yes", following the "yes" vote surpassing the "no" in the prior week. However, the ICM poll for the Sunday Telegraph has the Yes campaign 8% ahead, signaling the fight for Scotland's future is now neck and neck.
Here are some highlights for the week ahead:
- Monday: Swiss PPI, Eurozone trade balance, US empire state manufacturing, industrial production
- Tuesday: RBA minutes; UK CPI, PPI; German ZEW; US PPI, TIC capital flow
- Wednesday: BoE minutes, UK job; Swiss ZEW; Eurozone CPI; US CPI, NAHB housing index, FOMC rate decision
- Thursday: New Zealand GDP; Japan trade balance; SNB rate decision; UK retail sales; US housing stats, jobless claims, Philly Fed survey
- Friday: German PPI; Canada CPI